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Tesla is the most shorted stock in the world
Despite the latest Reddit craze, GameStop did not take the title of the most shorted stock in 2020. Instead, Tesla has emerged victorious, having cost short-sellers over US$40 billion.
Tesla is the most shorted stock in the world
Despite the latest Reddit craze, GameStop did not take the title of the most shorted stock in 2020. Instead, Tesla has emerged victorious, having cost short-sellers over US$40 billion.
Tesla has had a massive year, cementing itself as an automotive company and a clean energy provider in less than 12 months, and propelling its owner Elon Musk to top spot on the richest person on the planet list – an inch above Amazon’s Jeff Bezos before Mr Bezos reclaimed the crown in February.
On the back of all of these successes and more, Tesla stock was the single best-performing S&P 500 stock of 2020.
As a result, Tesla was also the stock that cost short-sellers an estimated US$40.1 billion. And according to data presented by Trading Platforms, this is the biggest loss from the short-selling position from any stock, with the next largest recorded loss from Apple at US$6.7 billion.
While short selling has long been a popular strategy for stock traders who are willing to take on the risk of capital loss, the tactic’s fame has soared in recent months when self-proclaimed Reddit stock market activists initiated what is known as a short squeeze on GameStop’s stock.
Essentially, short selling involves an investor borrowing shares of a company (usually from a broker dealer), before selling them back into the market. Short-sellers are betting that the borrowed stock they sold will drop in price and once it does, they snap them up for less money.
The short-seller then returns the stock to the lender and makes a profit by pocketing the difference between the sell price and buy price.
A short squeeze is a sudden increase in the price of a stock resulting in short-sellers buying back their stocks to cover their short positions, often resulting in billions of dollars lost for short-sellers.
According to the latest research, the number of profits generated from short-selling positions is quite low compared with the losses. In fact, in 2020, the 10 stocks that generated the most profit from the short position totalled an estimated US$9.75 billion.
Trading Platforms noted that as of January 2021, PubMatic Inc’s stock has the most short-sell positions by share of float shorted. Next on that list is American movie theatre franchise AMC Entertainment, with 66.06 per cent of their total float having been shorted.
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